* N. Korea attack rattles global markets, sinks commodities * Q3 GDP growth revised up; October existing home sales fall * Dow off 1.5 pct, S&P off 1.6 pct, Nasdaq off 1.8 pct (Updates to midday, changes byline)
By Leah Schnurr
NEW YORK, Nov 23 (Reuters) - U.S. stocks dropped more than 1 percent on Tuesday as rising tensions on the Korean peninsula added to worries about how euro-zone debt woes could affect domestic markets.
North Korea fired scores of artillery shells at a South Korean island, killing two soldiers and setting houses ablaze, and South Korea returned fire. The iShares MSCI South Korea Index Fund fell 5.5 percent.
Global stock markets tumbled, while the U.S. dollar climbed and U.S. oil futures prices fell 1.1 percent to $80.89 a barrel. Energy and materials shares were the biggest losers, including Chevron Corp, which fell 2.6 percent to $81.28.
Light volume, with traders away ahead of the Thanksgiving holiday, could also exacerbate moves as fewer people in the market leaves fewer people willing to take the opposite side of a trade.
"The sellers are selling into a vacuum because the pros have left, for the most part," said Jeffrey Saut, chief investment strategist of Raymond James in St. Petersburg, Florida.
The Dow Jones industrial average dropped 170.40 points, or 1.52 percent, to 11,008.18. The Standard & Poor's 500 Index shed 19.20 points, or 1.60 percent, to 1,178.64. The Nasdaq Composite Index lost 45.36 points, or 1.79 percent, to 2,486.70.
Stocks also took their cue from the euro, which slumped to a 7-week low against the dollar. The two assets have moved in tandem in the past with both viewed as proxies for risk.
The European Union urged Ireland to adopt an austerity budget on time to unlock promised EU/IMF funding, while Irish Prime Minister Brian Cowen rebuffed calls for a snap election and insisted the budget would go ahead as planned on Dec. 7.
Data showed the economy grew faster than previously estimated in the third quarter, but still not enough to reduce stubbornly high unemployment. Another report showed existing home sales fell more than forecast in October after two months of gains.
Paul Ballew, chief economist at Nationwide in Columbus, Ohio, said that while there were some positives in the GDP report, it didn't change the market's expectations for where the economy is heading and was overshadowed by international events.
On the upside, J Crew Group Inc surged 16.4 percent to $43.83 after the retailer agreed to a $2.86 billion buyout by two private equity firms.
Minutes of the Federal Reserve's Nov. 3 Open Market Committee meeting that included its decision for more quantitative easing will be released at 1900 GMT. (Reporting by Leah Schnurr; Editing by Jan Paschal)